Kapiolani Health agrees to pay record $3.4 million settlement

HONOLULU – One of Hawaii’s leading health care companies has paid $3.4 million to the state and federal governments to settle claims that two of the company’s subsidiaries filed more than $700,000 in fraudulent Medicare and Medicaid claims.

U.S. Attorney Steven Alm and state Attorney General Earl Anzai said Kapiolani Health, on behalf of its subsidiaries Kapiolani Home Health Services and Kapiolani Extended Care, paid the U.S. government $2.52 million and the state $700,000. Authorities alleged the two companies submitted false billings to the Medicare and Medicaid programs from July 1995 to August 1997.

In addition, Kapiolani Health has paid $630,000 to a “whistleblower,” a nurse who worked for one of the companies and who reported the fraudulent billings. The nurse, who was not identified and who no longer works for Kapiolani Home Health Services, also received $180,000 to cover her attorneys’ fees and expenses.

Alm and Anzai said the settlement is the largest of its kind in Hawaii.

Anzai hinted there are even larger settlements looming, but declined to be specific because investigations are continuing.

“This is a good day for consumers in the state of Hawaii,” Alm said. “I encourage anyone else out there, if they think fraud or abuse is going on, to call the FBI, the U.S. attorney’s office or the attorney general’s office to report it.”

In a statement, Kapiolani Health President and Chief Executive Roger Drue said the settlement “resulted from our failure to effectively oversee” its home health care companies, which are now inactive.

“We were not fully aware of the documentation, claims processing and training deficiencies in the two companies until mid-1997,” Drue said in the statement.

Once the problems were identified, Kapiolani Health “initiated talks with the government to repay funds we had received based on invalid home health claims,” he said.

The executives who ran the two companies are no longer with Kapiolani, Drue said.

The fraud was brought to light in a civil suit filed in federal court by the nurse. Under federal law, a citizen can file a lawsuit in the name of the United States, alleging that false claims have been submitted to the government. Thomas Grande, the lawyer who sued on behalf of the nurse, said she repeatedly brought concerns about billing irregularities to company executives but was ignored.

Grande described the nurse as “a real hero.”

Alm said that of the $1.3 million in Medicare and Medicaid payments to the two Kapiolani home health care companies during a two-year period that ended in August 1997, $709,000 was based on false claims.

Dewey Kim Jr., of the state attorney general’s medicaid investigations division, said the two Kapiolani companies were supposed to provide medical services to patients who were homebound and incapable of traveling to a doctor’s or therapist’s office for treatment.

But the investigation found home health care claims were being filed for patients who: – Walked two blocks to a grocer and a bank. – Were able to go downstairs to their laundry. – Went to dinner with friends. – Had no trouble house-hunting and visiting friends. – Were able to play golf.

The investigation also uncovered excessive visits to patients long after services should have been discontinued; double billings for the same service; inadequate documentation that the service was needed; the use of outside service providers who billed the Kapiolani companies only to have Kapiolani add a a100 percent markup when submitting whose claims to Medicare of Medicaid.

Kim said it does not appear people at the two companies profited through the fraudulent billings or bill padding.

He said an audit fount that during the period covered by the investigation, Kapiolani Home Health services had a 65 percent billing error rate. Drue said Kapiolani has expanded its compliance programs and created an internal audit division in response to the billing problems that were uncovered.

Anzai said the settlement underscores the state’s efforts to eliminated improper billing by health care providers.

Past settlements have been obtained from such retail heavyweights as Longs Drugs.

“This latest case shows no matter how big you are, we will still investigate,” Anzai said.